International taxation issues to consider – Part 1
Posted by Northadvisory on January 12, 2018
Globalisation has had a profound impact on the modern business operating environment, whereby significant technological transformations especially over the last decade have given arise to increased international mobilisation of both staff and senior level management. We begin with the first of our three part series overview of ‘International Taxation Issues to Consider’ with a summary of taxation considerations with respect to individuals and companies.
- For individuals coming to Australia, the following should be considered:
- Determining if they are an Australian resident. If they are a resident, there are CGT consequences and taxation of foreign sourced income to consider
- Whether the temporary resident rules apply, if full residency does not apply
- Any applicable double taxation agreements (DTA) if they are a resident of another country at the same time
- Foreign Superannuation they might have
- Withholding Taxes that may apply to foreign income
- Residents are taxed on all income at resident rates + Medicare Levy, non-residents are taxed on Australian income at non-resident rates with no Medicare Levy
- Visa Status
- International tax avoidance and attribution of income to Australia under CFC rules
- Relief from double taxation from exemptions or foreign tax credits (FITO)
- For individuals leaving Australia:
- Residency status where a person leaves Australia. If they cease their residency, there are CGT consequences and foreign sourced income is no longer assessable
- DTA issues if they have residency in more than 1 country
- Taxation of income earned by non-residents
- International tax avoidance
- Impact on SMSFs
- Possible exemption for foreign employment income
- CGT issues on departing Australia. It is possible to defer CGT on becoming a non-resident to the actual disposal date
- Relief from double taxation from exemptions for foreign tax credits (FITO)
- Residence of individuals determined by 4 legal tests (s6 ITAA 1936):
- Person is “residing” in Australia, according to ordinary concepts – main test
- Domicile and Permanent Place of Abode of the person
- 183-day test, unless it is established the usual place of abode is outside Australia
- Eligible Employee for the purposes of the Superannuation Act 1976
- An individual is a temporary resident if they:
- Hold a temporary visa granted under the Migration Act 1958
- Not an Australian resident under the Social Security Act 1991
- Spouse is not an Australian resident under the Social Security Act 1991.
- Removal of 50% CGT Discount for non-residents/temporary residents:
- The 50% CGT Discount is removed for assets acquired by non-residents/temporary residents after 08/05/2012
- If an asset is acquired before 08/05/2012 and a valuation is obtained at 08/05/2012, may apply discount to portion of gain accrued up to 08/05/2012.
- A company is considered an Australian resident if it is:
- Incorporated in Australia, or
- Carries on a business in Australia and has Central Management & Control in Australia, or
- Carries on a business in Australia and its voting power is controlled by shareholders who are Australian residents
If you have questions on any of the above issues raised, please do not hesitate to contact us.
T: 02 9984 7774
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